Frequently Asked Questions

The European Union and the Bulgarian state invest in the development of businesses, innovations, environmental projects, etc., not only through grants, but also through financial instruments in the form of loans, guarantees, investments, etc., which require repayment at a later date.

The Fund Manager of Financial Instruments in Bulgaria" EAD (FMFIB) is a commercial company owned by the Bulgarian State which rights are exercised by the Minister of Innovations and Growth. The Fund was established by a decree of the Council of Ministers on July 22, 2015, with the aim of managing the funds earmarked for financial instruments under programs co-financed by the European Structural and Investment Funds (ESIF) and European Funds under Shared Management (EFSM).

The activities of FMFIB are regulated by national legislation and European Union (EU) law. The main acts include Regulation 1303/2013, Regulation 2021/1060, the Law on the Management of Funds under European Funds under Shared Management, the Public Procurement Law, etc.

FMFIB performs the functions of a Fund of Funds (FoF) – it allocates targeted public funds from European programs and national co-financing through specialized financing schemes (financial instruments).

The main activities of FMFIB are related to:

• conducting market consultations to assess the demand and supply of financial products in the relevant area and among the selected target groups;

• structuring debt and equity financial instruments and preparing their technical specifications;

• conducting an open and transparent selection of financial intermediaries to provide additional private resources to support final recipients – enterprises and the public sector;

• concluding operational agreements with the selected financial intermediaries;

• monitoring, risk management, operational and financial reporting on public resources with a view to achieving the objectives set out in the relevant European program.

FMFIB has signed agreements for the 2021-2027 programming period for the management of financial instruments with a total resource amount of nearly BGN 2 billion / EUR 1 billion with the Managing Authorities of:

• Competitiveness and Innovation in Enterprises Programme 2021-2027

• Research, Innovation and Digitalization for Smart Transformation Programme 2021-2027

• Urban Development Programme 2021-2027

• Education Programme 2021-2027

• Environment Programme 2021-2027

Additional private resources are expected to be mobilized for each of the instruments through selected financial intermediaries, so that the total amount of funds to be invested in the Bulgarian economy during the 2021-2027 programming period will double to nearly BGN 4 billion / EUR 2 billion.

Financial instruments are a specialized form of support with European funds under shared management and the national budget, as well as with additional funds attracted from the private sector. They can be debt instruments (loans, loan guarantees) or equity/quasi-equity investments.

Financial instruments aim to make more efficient use of public resources compared to grants. (For example, loans can be reused for new investments after they have been repaid).

They provide financial support to target groups of final recipients (enterprises or the public sector) for the implementation of economically viable projects. In this way, they contribute to over coming identified market imperfections, implement financial discipline, and help achieve the EU's strategic goals and policies.

The Fund Manager of Financial Instruments in Bulgaria (FMFIB) supports the Bulgarian economy by:

• Managing public funds from European and national programs through developing financial instruments that are designed in accordance with the specifics of the local market environment.

• Ensuring the effective and sustainable implementation of debt and equity financial instruments to achieve economies of scale and build national expertise.

• Improving access to finance for small and medium-sized enterprises, start-ups, and innovative businesses that have difficulty accessing bank loans.

• It mobilizes additional private capital, multiplying public resources thus supporting economic development.

• Supports projects with growth and innovation potential, strengthening the competitiveness and sustainability of Bulgarian businesses.

• It creates a more favorable business environment through innovative and flexible forms of financing adapted to market needs.

• It controls and manages the risk of invested funds at all levels – from European programs to final recipients – with a high degree of financial discipline.

These activities of FMFIB aim to stimulate the development of innovative projects with growth potential, increase investment activity and employment, and create conditions for sustainable socio-economic development in Bulgaria.

The Fund Manager of Financial Instruments in Bulgaria is:

• a single-shareholder company owned by the Bulgarian state, which rights are exercised by the Minister of Innovation and Growth.

• a two-tier management system – a Supervisory Board and a Management Board, elected in accordance with the rules of the Public Enterprises Act.

The organizational structure of FMFIB is designed to ensure the effective implementation of the company's activities in line with the objectives of European programs – sources of public resources for financial instruments.

Some of the debt financial instruments of FMFIB funds are provided interest-free or without a guarantee issuance fee. However, this public resource must be combined with co-financing at market levels from the financial intermediary (in most cases amounting to at least 20-30% of the total resource of the financial instrument. Therefore, financial products for final recipients cannot take the form of interest-free or grant financing, but the conditions are nevertheless significantly relaxed.

The structure of financial instruments allows for certain types of activities and products to combine funds from a financial instrument with grants. In these cases, the final recipients will receive the grant under a simplified procedure parallel with the loan approval. These funds can be used, for example, to prepare an energy audit report.

At present, FMFIB does not provide direct support. The public resources managed by the company reach the final recipients through financial intermediaries selected under a transparent procedure in accordance with the requirements of the Public Procurement Act.

Advantages of financial instruments:

• Overcoming market imperfections

Funding is provided to target groups with difficult access to financial resources, with economic activity that is important for achieving the objectives of the relevant European program.

Financial instruments offer more favorable terms compared to other similar financial products, such as those offered by banks.

• Leverage effect

In addition to public funds, financial instruments mobilize private funding, which increases the total amount of support for final recipients.

• Recycling of funds

Repaid/recovered funds from financed projects, as well as potential other revenues from them, are reused to support other eligible final recipients and projects.

• Financial discipline

Funds provided through financial instruments are subject to repayment/recovery by final recipients. This leads to a more efficient use of public resources compared to grant aid and reduces the likelihood of enterprises developing a dependency on it.

• Transfer of knowledge and experience

Final recipients can benefit from the expertise of financial intermediaries and their private sector partners in structuring economically viable projects.

Based on signed financial agreements with the managing authority of the relevant program, FMFIB selects financial intermediaries based on an assessment of their legal status, financial, economic, and organizational capacity to manage financial instruments (FI).

FMFIB conducts the procedures for selecting financial intermediaries for each financial instrument in compliance with applicable EU and national legislation. Financial intermediaries are selected based on open, transparent, proportionate, and non-discriminatory procedures.

Compliance with these principles is ensured by applying a selection procedure in accordance with the requirements of the Public Procurement Act.

When selecting financial intermediaries, FMFIB shall assess whether the entities implementing special funds, manage the financial instruments in an independent manner, in accordance with the relevant professional standards and in compliance with the applicable legislation, ensuring that the financial intermediaries have:

• the legal capacity and powers to perform the tasks envisaged for the implementation of the financial instruments in accordance with applicable EU and national law;

• the necessary economic and financial viability;

• sufficient capacity to implement financial instruments, including an appropriate organizational structure and management framework acceptable to FMFIB;

• effective and efficient internal control systems;

• willingness to be audited by FMFIB, the managing authority of the European funding program, the certifying authority, the European Commission, national and European audit authorities, and the European Court of Auditors.

When selecting financial intermediaries, FMFIB considers the nature of the relevant financial instruments, the candidates' experience in implementing them, the expertise and experience of the team, and the candidate's operational and financial capacity.

When selecting financial intermediaries, FMFIB applies at least the following criteria:

• objectivity of the methodology for determining and evaluating final recipients;

• market-oriented fees for managing the financial instrument, linked to the results achieved;

• the terms and conditions applied when approving the financing and its parameters for final recipients;

• the ability to attract private funds for investment in final recipients in addition to public resources;

• measures applied to manage conflicts of interest, including in cases where the financial intermediary invests its own funds and/or shares the risk on the instrument concerned.

Answer: FMFIB does not directly finance final recipients but uses the intermediation of credit and/or financial institutions (when a debt financial instrument in the form of a loan is applied) and fund managers (for equity instruments in the form of an investment in exchange for the acquisition of a share of ownership).

The following financial instruments are suitable for you:

• Debt instrument "Digitization" under CIE Program

• Equity instrument "Enterprise Innovation Fund";

• Equity instrument "Digitalization Funds";

• Entrepreneurship family of funds.

Answer: The Entrepreneurship - Early Stage Fund, a financial instrument for equity investment, is suitable for you. Its purpose is to promote entrepreneurship as well as to finance the establishment of new or start-up companies. If you have an innovative idea, you can also take advantage of the Enterprise Innovation Fund and the Technology Transfer Fund. The development of existing enterprises at all stages of their life cycle can also be supported by the Entrepreneurship – Venture Capital Fund and the Entrepreneurship – Growth Fund.

FMFIB does not directly finance final recipients but uses the intermediation of fund managers who are responsible for selecting and applying the eligibility criteria for potential final recipients.

Another suitable instrument is the Risk-Sharing Micro-Finance Facility loans, which finance start-ups.

FMFIB is developing two financial instruments aimed at students/PhDs for the development of their own business or other type of entrepreneurial activity with the aim of self-employment and a quick transition from higher education to employment:

• Debt instrument Microfinancing for entrepreneurial of Students and PhD Candidates;

• Equity instrument "Fund for Startups by Students and PhD Candidates".

In addition, students/PhDs could also be eligible final recipients under all other FMFIB instruments.

Yes, municipalities and public enterprises can be financed through the Urban Development Funds for Northern and Southern Bulgaria for the 2021-2027 programming period.

They can also receive funding through recycled resources under the JESSICA initiative or the Urban Development Funds 2014-2020. The selected intermediaries are the RUDF and the Sustainable Cities Fund, which are responsible for applying the eligibility criteria and selecting suitable projects/final recipients.

Yes, the funds under the debt instrument for the Water Sector are primarily directed towards the six newly consolidated water and sewerage sector (WSS) operators - Veliko Tarnovo, Gabrovo, Pleven, Sofia Province, Targovishte, Haskovo, as well as WSS Dobrich.

In addition, projects of other consolidated water operators can also be financed, including projects that are phased between the 2014-2020 and 2021-2027 programming periods.

Yes, through recycled resources from OPHRD 2014-2020, projects of non- governmental organizations and social enterprises can be financed through the debt instrument Risk-Sharing Micro-Finance Facility. The maximum loan amount is BGN 48,895/EUR 25,000, and the financial intermediaries through which this instrument is offered are:

SIS Credit

Microfund

First Investment Bank

You can take advantage of debt financing under the Circular Economy Financial Instrument, which offers financial support through a combination of loans and grants in two areas:

Energy Efficiency for businesses seeking to improve their energy efficiency, build capacity for energy from renewable sources, reduce greenhouse gas emissions, etc.

Resource efficiency for companies that introduce circular production models, waste-free production, resource reuse, etc.

Final recipients will be able to receive non-repayable support together with the loan in two forms: technical support for project preparation (e.g., for preparing an energy audit report) or a capital discount that can simplify part of the loan after achieving the predefined results upon completion of the project. The amount that can be granted for technical support is up to BGN 20,000, and for a capital discount up to 15% of the loan amount.